June 6,1998
Securities and Exchange Commission
Attn: Filing Desk, Stop 1-4
450 Fifth Street, N.W.
Washington, DC 20549
Re: Professionally Managed Portfolios
File No. 811-5037
CIK No. 811030
Dear Sir or Madam:
On behalf of the above Registrant and pursuant to Rule 30b-2 under the
Investment Company Act of 1940, I enclose for filing via EDGAR, a copy of the
Annual Report to shareholders of the Harris Bretall Sullivan & Smith Growth
Equity Fund series of the Registrant for the year ended March 31, 1998.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
/s/
Robert H. Wadsworth
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
Annual Report
March 31, 1998
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
May 1, 1998
Dear Shareholders:
We are pleased to present you with the Annual Report for the Harris Bretall
Sullivan & Smith Growth Equity Fund (the "Fund") for the year-end March 31,
1998.
General Market Overview
It is an old Wall Street postulate that the market loves to climb a "Wall of
Worry." Confounding most of the experts, the stock market, as represented by the
S&P 500 Index, completed one of its most successful 12-month periods.
The bricks in the current Wall are substantive, with each brick having the
potential to create a barrier to increasing financial asset prices. The bricks
include: the Asia crisis; creation of a new European currency; turmoil in the
Middle East and Saddam Hussein; allegations regarding President Clinton and the
potential of a political gridlock in Washington D.C.; slowing of corporate
profits; fear of an over heating economy which could disrupt inflation and
interest rates and speculation of a potentially over-valued market. However,
with the slow erosion of these bricks, stock and bond prices should rise. We
forecast that 1998 will be a year of steadily improving investor confidence,
thus eroding this "Wall of Worry."
Portfolio Review
Since inception on May 1st of 1996, the Fund's total return through March 31,
1998, was 62.24%, and the average annual total return was 28.75%. Over the past
12 months the Fund has returned a total of 47.02%.
The Fund continues to focus on the high quality health care, consumer, financial
service and technology related companies. Our belief is that as the world
continues its path towards a global marketplace, high quality U.S. based
companies with global franchises such as Coca-Cola Co., General Electric Co. and
Johnson & Johnson, will be the major benefactors. Additionally, the high quality
technology companies such as Intel Corp., Microsoft Corp., and Cisco Systems,
Inc. will benefit as businesses around the world invest in more efficient ways
to position themselves for the new competition and marketplace. Health care
companies (specifically the large drug companies such as Merck, Pfizer and
Abbott Labs), will benefit as the baby boom generation ages and has a desire to
live forever. Financial service companies will also benefit as the boomer
continues to both accumulate and inherit tremendous wealth. We are confident the
Harris Bretall portfolio owns the strongest and best U.S. based companies to
take advantage of the positive market environment that we see for many years to
come.
Our valuation work shows the market fairly valued, based on 1998 earning
estimates. As of March 31, 1998, the Fund was 99% invested.
Outlook
Despite the elements that presently compose the "Wall of Worry," Harris Bretall
believes that the Dow Jones Industrial Average will eventually surpass the
20,000 level. The confluence of strong corporate earnings, stable
<PAGE>
inflation and interest rates, a strong U.S. currency, and a flood of new money
will drive the U.S. stock market. With earnings playing such an important part
in this equation for success, the Harris Bretall portfolio concentrates on
companies that are expected to produce strong and persistent earnings growth.
Today, with the "Wall of Worry" likely to continue to erode, and the power of
the money flows unlikely to abate, investors have an unprecedented opportunity--
buy stocks and enjoy the ride.
Sincerely,
/s/ /s/
John J. Sullivan, CFA Gordon J. Ceresino
Partner Senior Vice President
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
Value of $10,000 vs the S&P500 and the Russell 1000 Growth Indices
Average Annual Total Return
Period Ended March 31, 1998
1 Year.....................47.02%
Since Inception (5/1/96)...28.75%
Qtr Adj Fund Adj S&P Adj Russ1
5/1/96 10000 10000 10000
6/30/96 10040 10277.7721 10336.654
9/30/96 10310 10599.755 10708.949
12/31/96 10775.6 11486.958 11355.634
3/31/97 11035.7 11791.2361 11416.609
6/30/97 12836.7 13845.9361 13576.091
9/30/97 13817.2 14884.8664 14596.359
12/31/97 14151.3 15317.2479 14817.932
3/31/98 16224.4 17452.4952 17063.294
Past performance is not predictive of future performance.
The S&P 500 is a broad market-weighted average of U. S. blue-chip
companies. All indices are unmanaged and returns include reinvested dividends.
The Russell 1000 Growth Index measures the performance of those Russell 1000
securities with higher price-to-book ratios and higher forecasted growth values.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 99.6% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Goods/Conglomerate: 7.0%
<S> <C> <C>
3,300 General Electric Company................................................ $ 284,419
4,080 Illinois Tool Works, Inc................................................ 264,180
5,410 Tyco International Ltd.................................................. 295,521
-------
844,120
-------
Consumer Cyclical: 6.8%
3,790 The Home Depot, Inc..................................................... 258,194
4,484 The Interpublic Group of Companies, Inc................................. 278,569
5,560 Wal-Mart Stores, Inc.................................................... 282,517
-------
819,280
-------
Consumer Services: 6.7%
7,353 Cendant Corp.*.......................................................... 291,363
6,135 Mattel, Inc............................................................. 243,099
2,480 Walt Disney Company..................................................... 264,740
-------
799,202
-------
Consumer Staples: 6.7%
3,310 Colgate-Palmolive Company............................................... 286,729
2,400 Gillette Company........................................................ 284,850
2,792 Procter & Gamble Company................................................ 235,575
-------
807,154
-------
Drugs/Biotechnology: 11.1%
3,200 Abbott Laboratories..................................................... 241,000
2,245 Bristol-Myers Squibb Company............................................ 234,182
2,100 Merck & Company, Inc.................................................... 269,587
3,000 Pfizer, Inc............................................................. 299,063
3,500 Schering-Plough Corp.................................................... 285,906
-------
1,329,738
---------
Electronics: 1.8%
5,000 Solectron Corp.*........................................................ 211,250
-------
See accompanying Notes to Financial Statements.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
SCHEDULE OF INVESTMENTS at March 31, 1998, Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Financial: 14.2%
1,942 American International Group, Inc....................................... $ 244,571
2,920 BankAmerica Corp. ................................................... 241,265
5,400 Charles Schwab Corp..................................................... 205,200
1,700 Citicorp................................................................ 241,400
4,000 Federal National Mortgage Company....................................... 253,000
2,935 Merrill Lynch & Company, Inc............................................ 243,605
6,460 Norwest Corp............................................................ 268,494
-------
1,697,535
---------
Food and Beverage: 6.5%
3,500 Coca-Cola Company....................................................... 271,031
6,800 ConAgra, Inc............................................................ 218,450
6,755 PepsiCo, Inc............................................................ 288,354
-------
777,835
-------
Health Products: 2.1%
3,380 Johnson & Johnson....................................................... 247,796
-------
Machinery: 1.9%
5,850 Dover Corp.............................................................. 222,300
-------
Medical: 1.8%
4,130 Medtronic, Inc.......................................................... 214,244
-------
Retail: 11.0%
3,100 Dayton Hudson Corp...................................................... 272,800
6,100 Kroger Company*......................................................... 281,744
7,100 Rite Aid Corp........................................................... 243,175
7,340 Safeway, Inc.*.......................................................... 271,121
5,400 Starbucks Corp.*........................................................ 244,687
-------
1,313,527
---------
See accompanying Notes to Financial Statements.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
SCHEDULE OF INVESTMENTS at March 31, 1998, Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Technology/Defense: 9.0%
6,000 Autodesk, Inc........................................................... $ 258,750
3,820 Automatic Data Processing, Inc.......................................... 259,999
3,300 Microsoft Corp.*........................................................ 295,350
8,500 Oracle Systems, Inc.*................................................... 268,281
-------
1,082,380
---------
Telecommunications - Hardware: 13.0%
7,300 Applied Materials, Inc.*................................................ 257,781
4,312 Cisco Systems, Inc.*.................................................... 294,833
8,030 Compaq Computer Corp.................................................... 207,776
3,000 Intel Corp.............................................................. 234,187
4,000 Linear Technology Corp.................................................. 276,000
4,200 Tellabs, Inc.*.......................................................... 281,925
-------
1,552,502
---------
Total Investments in Securities (cost $8,978,919+): 99.6% .............. 11,918,863
Other Assets less Liabilities: 0.4%..................................... 52,346
------
Total Net Assets: 100.0% ............................................... $11,971,209
===========
<FN>
*Non-income producing security.
+ At March 31, 1998, the cost for Federal income tax purposes was the same as
the basis for financial reporting. Unrealized appreciation and depreciation of
securities were as follows:
Gross unrealized appreciation........................................... $ 2,962,103
Gross unrealized depreciation........................................... (22,159)
-------
Net unrealized appreciation................................... $ 2,939,944
===========
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $8,978,919) ................................. $11,918,863
Cash................................................................................... 5,641
Receivables:
Due from Advisor................................................................. 2,027
Dividends ....................................................................... 4,437
Fund shares sold................................................................. 1,000
Securities sold.................................................................. 48,075
Prepaid expenses....................................................................... 19,837
------
Total assets .............................................................. 11,999,880
----------
LIABILITIES
Payables:
Administration fee............................................................... 2,647
Distribution fees................................................................ 6,830
Accrued expenses....................................................................... 19,194
------
Total liabilities.......................................................... 28,671
------
NET ASSETS $11,971,209
===========
Net asset value, offering and redemption price per share
($11,971,209/739,039 shares outstanding;
unlimited number of shares authorized without par value) ........................ $16.20
======
COMPONENTS OF NET ASSETS
Paid-in capital ....................................................................... $ 8,999,336
Undistributed net realized gain on investments......................................... 31,929
Net unrealized appreciation on investments............................................. 2,939,944
---------
Net assets ...................................................................... $11,971,209
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Year Ended March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends........................................................................ $ 59,939
Interest......................................................................... 14,914
------
Total income............................................................... 74,853
------
Expenses
Advisory fees.................................................................... 57,487
Administration fee............................................................... 30,000
Distribution fees................................................................ 19,162
Transfer agent fees.............................................................. 16,329
Audit fee........................................................................ 15,800
Fund accounting fees............................................................. 14,023
Custody fees..................................................................... 9,890
Reports to shareholders.......................................................... 6,544
Miscellaneous.................................................................... 5,323
Trustee fees..................................................................... 4,026
Legal fees....................................................................... 3,877
Registration fees................................................................ 956
Insurance........................................................................ 295
---
Total expenses............................................................. 183,712
Less: expenses waived and reimbursed....................................... (84,835)
-------
Net expenses............................................................... 98,877
------
Net investment loss ................................................. (24,024)
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions..................................... 34,322
Net change in unrealized appreciation on investments............................. 2,750,964
---------
Net realized and unrealized gain on investments............................ 2,785,286
---------
Net increase in net assets resulting from operations ................ $ 2,761,262
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year May 1, 1996*
Ended through
March 31, 1998 March 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment (loss) income.............................................. $ (24,024) $ 53
Net realized gain from security transactions.............................. 34,322 9,022
Net change in unrealized appreciation on investments...................... 2,750,964 188,980
--------- -------
Net increase in net assets resulting from operations ............... 2,761,262 198,055
--------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................................... -0- (1,493)
Net realized gain from security transactions.............................. (9,975) -0-
------ ------
Total distributions to shareholders ................................ (9,975) (1,493)
------ ------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a)................................................. 5,753,555 3,269,805
--------- ---------
Total increase in net assets ....................................... 8,504,842 3,466,367
NET ASSETS
Beginning of period....................................................... 3,466,367 -0-
--------- ---------
End of period ............................................................ $11,971,209 $3,466,367
=========== ==========
<FN>
(a) A summary of capital shares transactions is as follows:
Year May 1, 1996*
Ended through
March 31, 1998 March 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Value Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold ......................................... 476,406 $6,518,871 327,664 $3,416,156
Shares issued in reinvestment of distributions....... 718 9,975 140 1,488
Shares redeemed...................................... (52,264) (775,291) (13,625) (147,839)
------- -------- ------- --------
Net increase......................................... 424,860 $5,753,555 314,179 $3,269,805
======= ========== ======= ==========
*Commencement of operations.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Year May 1, 1996*
Ended through
March 31, 1998 March 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period...................................... $11.03 $10.00
Income from investment operations:
Net investment loss................................................. (0.02) 0.00
Net realized and unrealized gain on investments..................... 5.20 1.04
---- ----
Total from investment operations.......................................... 5.18 1.04
---- ----
Less distributions:
From net investment income.......................................... 0.00 (0.01)
From net capital gains.............................................. (0.01) 0.00
----- ----
Total distributions....................................................... (0.01) (0.01)
----- -----
Net asset value, end of period............................................ $16.20 $11.03
====== ======
Total return.............................................................. 47.02% 10.36%
Ratios/supplemental data:
Net assets, end of period (millions)...................................... $ 12.0 $ 3.5
Ratio of expenses to average net assets:
Before expense reimbursement and waiver............................. 2.39% 4.97%+
After expense reimbursement and waiver.............................. 1.29% 1.28%+
Ratio of net investment loss to average net assets:
Before expense reimbursement and waiver............................. (1.42)% (3.69)%+
After expense reimbursement and waiver.............................. (0.31)% 0.00%+
Portfolio turnover rate................................................... 40.96% 14.62%
Average commission rate paid per share.................................... $.0700 $.0688
<FN>
*Commencement of operations.
+Annualized.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
NOTES TO FINANCIAL STATEMENTS at March 31, 1998
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Harris Bretall Sullivan & Smith Growth Equity Fund (the "Fund") is a
diversified series of shares of beneficial interest of Professionally Managed
Portfolios (the "Trust"), which is registered under the Investment Company Act
of 1940 (the "1940 Act") as an open-end management investment company. The Fund
began operations on May 1, 1996. The investment objective of the Fund is to seek
growth of capital. The Fund seeks to achieve its objective by investing
primarily in equity securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System
are valued at the last reported sales price at the close of regular
trading on the last business day of the period; securities traded on
an exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the last reported bid
price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith
by the Board of Trustees. Short-term investments are stated at cost,
which when combined with accrued interest, approximates market
value.
B. Federal Income Taxes. The Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no federal income tax provision is
required.
C. Securities Transactions, Investment Income and Distributions. As is
common in the industry, security transactions are accounted for on
the trade date. The cost of securities owned on realized
transactions is relieved on a first-in, first-out basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
E. Reclassification of Capital Accounts. The Fund accounts and reports
for distributions to shareholders in accordance with the American
Institute of Certified Public Accountant's Statement of Position
93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies. For the year ended March 31,
1998, the Fund decreased paid-in capital by $24,024 due to the Fund
experiencing a net investment loss during the year. Net realized
gains and net assets were not affected by this change.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
NOTES TO FINANCIAL STATEMENTS, Continued
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
For the year ended March 31, 1998, Harris Bretall Sullivan & Smith L.L.C.
(the "Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnishes all investment advice,
office space, facilities, and most of the personnel needed by the Fund. As
compensation for its services, the Advisor was entitled to a monthly fee at the
annual rate of 0.75% based upon the average daily net assets of the Fund. For
the year ended March 31, 1998, the Fund incurred $57,487 in Advisory fees.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce fees to the extent necessary to limit the Fund's aggregate
annual operating expenses to 1.29% of average daily net assets. For the year
ended March 31, 1998, the Advisor has waived its fees and reimbursed the Fund
for expenses in the amount of $84,835. The cumulative unreimbursed amount paid
by the Advisor on behalf of the Fund is $159,087.
Effective March 31, 1998, the Advisor agreed to amend the expense
reimbursement agreement to limit the period within which the Advisor may recoup
the above amount from the Fund to no later than March 31, 2001, and subject to
the Fund's ability to effect such reimbursement and remain in compliance with
applicable expense limitations. In addition, the possible recoupment period of
any expense reimbursements in each year subsequent to 1998 will be limited to
three years from the year of the reimbursement, and subject to the Fund's
ability to effect such reimbursement and remain in compliance with applicable
expense limitations.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives an annual fee at
the following rate:
Under $25 million 0.12% of average daily net assets
$25 to $50 million 0.07% of average daily net assets
$50 to $100 million 0.05% of average daily net assets
Over $100 million 0.03% of average daily net assets,
with a minimum fee of $30,000 annually
For the year ended March 31, 1998, the Fund incurred $30,000 in
Administration fees.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and the Distributor.
<PAGE>
Harris Bretall Sullivan & Smith
Growth Equity Fund
NOTES TO FINANCIAL STATEMENTS, Continued
NOTE 4 - DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will pay a fee to
the Advisor, as Distribution Coordinator, at an annual rate of up to 0.25% of
the average daily net assets of the Fund. The fee is paid to the Advisor as
reimbursement for, or in anticipation of, expenses incurred for
distribution-related activity. For the year ended March 31, 1998, the Fund paid
to the Advisor, as Distribution Coordinator, $19,162 in distribution fees.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from the sale of securities, other
than short-term investments, for the year ended March 31, 1998, were $8,711,757
and $2,987,398, respectively.
NOTE 6 - YEAR 2000 ISSUE (UNAUDITED)
Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems it uses, and those used by the Fund's brokers and other major
service providers, do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 issue". Management is assessing its computer systems and the
systems compliance issues of its brokers and major service providers. Based on
information available to management, the Fund's brokers and major service
providers are taking steps that they believe are reasonably designed to address
the Year 2000 issue with respect to computer systems that they use. At this
time, however, there can be no assurance that these steps will be sufficient,
and the failure of a timely completion of all necessary procedures could have a
material adverse effect on the Fund's operations. Management will continue to
monitor the status of, and the Fund's exposure to, this issue.
<PAGE>
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders of
Harris Bretall Sullivan & Smith Growth Equity Fund and the
Board of Trustees of Professionally Managed Portfolios
We have audited the accompanying statement of assets and liabilities of Harris
Bretall Sullivan & Smith Growth Equity Fund (the "Fund"), a series of
Professionally Managed Portfolios, including the schedule of investments, as of
March 31, 1998, and the related statements of operations, changes in net assets,
and the financial highlights for the year then ended, and the statement of
changes in net assets and the financial highlights for the period from May 1,
1996 (commencement of operations) through March 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Harris
Bretall Sullivan & Smith Growth Equity Fund as of March 31, 1998, the results of
its operations, the changes in its net assets, and the financial highlights for
the year then ended, and the changes in its net assets and the financial
highlights for period from May 1, 1996 (commencement of operations) through
March 31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
May 1, 1998
<PAGE>
Advisor
Harris Bretall Sullivan & Smith L.L.C.
One Sansome Street, Suite 3300
San Francisco, CA 94104
(415) 765-8300
Account Inquiries (800) 385-7003
Distributor
First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Transfer and Dividend Disbursing Agent
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
(800) 385-7003
Independent Auditors
Ernst & Young LLP
515 South Flower Street
Los Angeles, CA 90071
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
